Chris Spillane
CURRO Holdings, an operator of private schools in South Africa, is in talks to buy smaller rival Advtech to take advantage of demand for paid-for education in the nation, according to two people familiar with the matter.
Discussions are at an early stage and one hurdle could be Advtech management’s reluctance to sell the company, said the people, asking not to be identified because the deliberations are private.
Since Advtech said on June 25 that it had received an “unsolicited proposal,” its stock has gained about 7 percent for a market value of R5.4 billion.
Yesterday, Curro shares fell 0.83 percent to close at R33.30.
Curro chief executive Chris van der Merwe said he could not comment beyond a June 12 statement that the company had entered negotiations, which did not provide further detail. Advtech interim chief executive Frank Thompson declined to comment.
South Africa’s education system was ranked the fifth-worst among 144 countries in a survey by the World Economic Forum last year, increasing the attraction of private schooling for those who can afford it.
The school pass rate for final-year students fell for the first time in five years in 2014 after changes to the curriculum system. Advtech founder Brian Buckham, who retired from the board in 2010 after 23 years as a director, owns 5.2 percent of the company, while Thompson and chief operating officer Derek Honey own a combined 4.1 percent.
They were not seeking a sale, one of the people familiar with the matter said, and might be able to influence other investors if they decided not to recommend the offer.
Curro, controlled by PSG Financial Services, said in February that it planned to raise about R1.44bn from debt markets and a rights issue to develop new schools and examine potential acquisitions. The shares have gained 18 percent this year, valuing Curro at R10.8bn.
Curro has been the subject of charges of racially segregating its schools, saying it sometimes separated children based on culture.
Earlier this year, a group of around 30 parents signed a petition last week against what they said was racial segregation at the Curro Foundation School in Roodeplaat, near Pretoria.
The school is one of more than 40 run by Cape Town-based Curro Holdings, which has seen explosive growth since listing on the Johannesburg Stock Exchange in 2011, reflecting surging demand for private education from a growing black middle class.
Since listing, Curro’s share price has increased more than seven-fold. Curro is aiming to grow to 80 schools and about 100 000 pupils by 2020.
The company owns about 42 private schools across all the provinces and hopes to open at least seven schools a year to reach this goal.